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Acquisitions | 12 Months Ended
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Dec. 31, 2021
Business Combinations [Abstract] |
Acquisitions | ACQUISITIONS American First Finance Acquisition On December 17, 2021, the Company completed the AFF Acquisition. Under the terms and conditions set forth in the business combination agreement dated October 27, 2021, as amended, the Company acquired all of the equity interests of AFF in exchange for 8,046,252 shares of the Company’s common stock and cash consideration. Immediately following the AFF Acquisition, the Company’s shareholders owned approximately 83% of the common stock of the Company and the seller parties owned approximately 17%. In addition to the closing purchase price, the seller parties have the right to receive up to an additional $375.0 million of contingent consideration (the “Contingent Consideration”). In particular, the seller parties have the right to receive up to $250.0 million of additional consideration if AFF achieves certain adjusted EBITDA targets for the period consisting of the fourth quarter of 2021 through the end of 2022 and up to $50.0 million if AFF achieves certain adjusted EBITDA targets for the first half of 2023. In addition, the seller parties have the right to receive up to an additional $75.0 million of consideration in the event that the highest average stock price of the Company for any 10-day period from December 6, 2021 through February 28, 2023 is less than $86.25. The Contingent Consideration is payable in cash or Company common stock, at the Company’s discretion. The following table summarizes the consideration transferred in connection with the AFF Acquisition, net of cash acquired (in thousands except share and per share amounts):
| AFF Acquisition
Shares of FirstCash Holdings, Inc. common stock issued | 8,046,252 |
Closing common stock price per share at December 16, 2021 | $ | 62.83 |
Stock consideration | $ | 505,546 |
Cash consideration paid to AFF shareholders at closing | 253,087 |
Cash consideration paid to extinguish AFF pre-existing debt | 257,278 |
Present value of deferred consideration payable to AFF shareholders on December 31, 2022 | 23,873 |
Estimated fair value of Contingent Consideration (see Note 6) | 127,420 |
Less cash acquired | (48,263) |
Aggregate purchase consideration | $ | 1,118,941 |
The Company has performed a valuation analysis of identifiable assets acquired and liabilities assumed and allocated the aggregate purchase consideration based on the fair values of those identifiable assets and liabilities. The estimate of the fair values of identifiable assets acquired and liabilities assumed are determined by applying various valuation techniques, including discounted cash flow analyses, Monte Carlo simulations and the replacement cost method, which include various inputs and assumptions such as discount rates, projected cash flows and profit margins, attrition rates, economic obsolescence, expected charge-off rates and depreciation, some of which may not be observable in the market. The purchase price allocation is subject to change as the Company finalizes the analysis of the fair value at the date of the AFF Acquisition. The final determination of the fair value of assets acquired and liabilities assumed will be completed within the twelve-month measurement period from the date of the AFF Acquisition, as required by applicable accounting guidance. Due to the significance of the AFF Acquisition, the Company may use all of this measurement period to adequately analyze and assess the fair values of assets acquired and liabilities assumed. The allocation of the aggregate purchase consideration, net of cash acquired and subject to future measurement period adjustments, is as follows (in thousands):
| AFF Acquisition
Accounts receivable | $ | 11,660 |
Finance receivables (1) | 225,261 |
Leased merchandise | 139,649 |
Prepaid expenses and other current assets | 4,474 |
Property and equipment | 11,670 |
Operating lease right of use asset | 491 |
Goodwill (2) | 503,106 |
Intangible assets (3) | 305,100 |
Accounts payable and accrued liabilities | (28,357) |
Customer deposits and prepayments | (11,014) |
Lease liability, current | (10) |
Deferred tax liabilities | (42,608) |
Lease liability, non-current | (481) |
Purchase price | $ | 1,118,941 |
(1)Finance receivables acquired in a business combination that have experienced more-than-insignificant deterioration in credit quality since origination are considered purchased credit deteriorated (“PCD”). The Company evaluated the acquired finance receivables for deterioration in credit quality primarily based on delinquency status. At the acquisition date, an estimate of expected lifetime credit losses for PCD finance receivables is added to the acquisition date fair value to establish the initial amortized cost basis of the PCD finance receivables. As the initial allowance for credit losses is added to the fair value, there is no provision for loan losses recognized upon acquisition of a PCD loan. See Note 7. A reconciliation of the difference between the fair value of the PCD finance receivables and the unpaid principal balance as of the date of the acquisition is as follows (in thousands):
| PCD Finance Receivables
Unpaid principal balance of PCD finance receivables | $ | 41,900 |
Non-credit discount | (4,120) |
Amortized cost of PCD finance receivables | 37,780 |
Less allowance for loan losses recognized for PCD finance receivables | 32,036 |
Fair value of PCD finance receivables | $ | 5,744 |
For acquired finance receivables not deemed PCD at acquisition (“non-PCD”), the differences between the initial fair value and the unpaid principal balance are recognized as interest income on a level-yield basis over the lives of the related loans. At the acquisition date, an initial allowance for expected lifetime credit losses is estimated and recorded as provision for loan losses. See Note 7. A reconciliation of the difference between the fair value of the non-PCD finance receivables and the unpaid principal balance as of the date of the acquisition is as follows (in thousands):
| Non-PCD Finance Receivables
Unpaid principal balance of non-PCD finance receivables | $ | 177,456 |
Fair value premium | 42,061 |
Fair value of non-PCD finance receivables | 219,517 |
Less allowance for loan losses recognized for non-PCD finance receivables | 44,250 |
Carrying value of non-PCD finance receivables | $ | 175,267 |
(2)The goodwill is attributable to the excess of the aggregate purchase consideration over the fair value of the net tangible and intangible assets acquired and liabilities assumed and is considered to represent the synergies and economies of scale expected from combining the operations of the Company and AFF. This goodwill has been assigned to the retail POS payment solutions reporting unit. Excluding any potential earnout payments, approximately $212.3 million of the goodwill arising from the AFF Acquisition is expected to be deductible for U.S. income tax purposes. (3)Intangible assets acquired and the respective useful lives assigned consist of the following (in thousands, except useful life):
|  |  | Useful Life
| AFF Acquisition |  | (In Years)
Merchant relationships | $ | 194,000 |  |  | 7
Developed technology | 99,400 |  |  | 5
Trade name | 10,200 |  |  | 2
Relationships with existing lessees | 1,500 |  |  | 1
Total intangible assets | $ | 305,100 |  |  |
The merchant relationships are being amortized using an accelerated amortization method that reflects the future cash flows expected from existing merchant relationships. Annual estimated amortization expense of the merchant relationships over each of the next five years is approximately $30.6 million, $31.5 million, $29.8 million, $28.2 million and $26.2 million. 2021 Pawn Acquisitions During 2021, the Company acquired 46 pawn stores in the U.S. in three separate transactions and acquired a pawn license that will be used to open a new pawn store in the state of Nevada. The aggregate purchase price for these acquisitions totaled $79.5 million, net of cash acquired and subject to future post-closing adjustments. The aggregate purchase price was composed of $76.0 million in cash paid at closing and remaining short-term amounts payable to the sellers of approximately $3.5 million. During 2021, the Company also paid $5.8 million of purchase price amounts payable related to prior-year acquisitions. The purchase price of each of the 2021 pawn acquisitions was allocated to assets acquired and liabilities assumed based upon the estimated fair market values at the date of acquisition. The excess purchase price over the estimated fair market value of the net assets acquired has been recorded as goodwill. The goodwill arising from these pawn store acquisitions consists largely of the synergies and economies of scale expected from combining the operations of the Company and the pawn stores acquired. These pawn acquisitions were not material individually or in the aggregate to the Company’s consolidated financial statements. The estimated fair value of the assets acquired and liabilities assumed are preliminary, as the Company is gathering information to finalize the valuation of these assets and liabilities. The preliminary allocation of the aggregate purchase price for these individually immaterial pawn store acquisitions during 2021 (the “2021 Pawn Acquisitions”) is as follows (in thousands):
| 2021 Pawn Acquisitions
Pawn loans | $ | 7,920 |
Accounts receivable, net | 470 |
Inventories | 8,822 |
Other current assets | 294 |
Property and equipment | 1,174 |
Goodwill (1) | 59,645 |
Intangible assets | 2,835 |
Other non-current assets | 36 |
Current liabilities | (1,659) |
Aggregate purchase price | $ | 79,537 |
(1)Substantially all of the goodwill is expected to be deductible for U.S. income tax purposes. Unaudited Pro Forma Financial Information The results of operations for the AFF Acquisition and the 2021 Pawn Acquisitions have been consolidated since the respective acquisition dates. During 2021, revenue from AFF and the 2021 Pawn Acquisitions was $56.0 million and the net loss from AFF and the 2021 Pawn Acquisitions since the acquisition dates (including $11.9 million of transaction costs, net of tax) was approximately $41.0 million. Transaction costs associated with the AFF Acquisition and the 2021 Pawn Acquisitions were expensed as incurred and are presented in the consolidated statements of income as merger and acquisition expenses. These expenses include investment banking, legal, accounting and other related third-party costs, including preparation for regulatory filings. The following unaudited pro forma financial information reflects the consolidated results of operations of the Company as if the AFF Acquisition and the 2021 Pawn Acquisitions had occurred on January 1, 2020, after giving effect to certain adjustments (in thousands, except per share amounts):
| Year Ended |  | Year Ended
| December 31, 2021 |  | December 31, 2020
| As Reported |  | Pro Forma |  | As Reported |  | Pro Forma
Total revenue | $ | 1,698,965 |  |  | $ | 2,305,860 |  |  | $ | 1,631,284 |  |  | $ | 2,024,055 |
Net income | 124,909 |  |  | 156,257 |  |  | 106,579 |  |  | 60,059 |
Net income per share: |  |  |  |  |  |  |
Basic | $ | 3.05 |  |  | $ | 3.21 |  |  | $ | 2.57 |  |  | $ | 1.21 |
Diluted | 3.04 |  |  | 3.20 |  |  | 2.56 |  |  | 1.21 |
The unaudited pro forma results have been adjusted with respect to certain aspects of the AFF Acquisition and 2021 Pawn Acquisitions primarily to reflect: •depreciation and amortization expense that would have been recognized assuming fair value adjustments to the tangible and intangible assets acquired and liabilities assumed; •an increase in total indebtedness primarily incurred to finance certain cash payments and transaction costs related to the AFF Acquisition and 2021 Pawn Acquisitions, partially offset by the elimination of AFF’s pre-existing debt that was repaid at closing; •the inclusion in the year ended December 31, 2020 of $15.4 million in acquisition expenses incurred by the Company (excluded from the year ended December 31, 2021); and •the exclusion of $44.3 million of loan loss provision expense in the year ended December 31, 2021 resulting from the establishment of the initial allowance for expected lifetime credit losses for non-PCD finance receivables acquired in the AFF Acquisition (see Note 7). The pro forma financial information has been prepared for informational purposes only and does not include any anticipated synergies or other potential benefits of the AFF Acquisition and 2021 Pawn Acquisitions. It also does not give effect to certain future charges that the Company expects to incur in connection with the AFF Acquisition and 2021 Pawn Acquisitions, including, but not limited to, additional professional fees, legal expenses, severance, retention and other employee-related costs, contract breakage costs and costs related to consolidation of technology systems. The pro forma information is based on the Company’s preliminary valuation analysis of identifiable assets acquired and liabilities assumed and therefore subject to change. Pro forma results do not purport to be indicative of what would have resulted had the acquisitions occurred on the date indicated or what may result in the future. 2020 Pawn Acquisitions During 2020, the Company acquired 40 pawn stores in Mexico in two separate transactions and 22 pawn stores in the U.S. in two separate transactions. The aggregate purchase price for these acquisitions totaled $43.6 million, net of cash acquired. The aggregate purchase price was composed of $41.4 million in cash paid during 2020 and remaining short-term amounts payable to the sellers of approximately $2.2 million.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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